A.M. Best Affirms Rating of Consumer Insurance Services Limited and Removes From Under Review; Assigns Issuer Credit Rating.OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of Consumer Insurance Services Limited (CISL CISL Confédération Internationale des Syndicats Libres (French) CISL Common Intrusion Specification Language CISL Common Intelligence Services Layer CISL Confederazione Italiana dei Sindicati Lavoratori ) (New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. ) and removed the rating from under review. A.M. Best has also assigned an issuer credit rating of "a-" to CISL. The outlook for both ratings is stable. The ratings reflect CISL's favorable underwriting experience, consistently strong operating performance, liquid investment portfolio, distribution support from parent entities and its recent capital injection. Over the last few years, CISL has consistently achieved a strong underwriting performance with very favorable claims experience. The increase in operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before in 2005 was underpinned by both favorable underwriting results and a stable investment yield. The company improved its loss ratio to 17% in 2005 from 22% in 2004, demonstrating the good quality of its insurance portfolio. Despite a slightly higher expense ratio, CISL's combined ratio declined to 68%. Going forward, CISL--a member of the Fisher and Paykel (F&P) group--will continue to benefit from operational synergies in generating good quality of business through the lending activities of F&P Finance. CISL has a liquid and prudent investment portfolio to support its short-tailed liability. At fiscal year-end 2005, money market deposits accounted for more than 74% of CISL's total assets. Offsetting factors include the high dividend payout requirement, significant risk of business concentration in the consumer credit insurance market and the expected deterioration of capitalization on a risk-adjusted basis. Although the company is no longer a part of the guaranteeing subsidiaries of F&P Finance, it is obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to return no less than 90% of its after tax profits to its parent. The company's dividend payout averaged 101% over the past five years. Ongoing capital repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. by its parent could limit CISL's growth potential. The continued premium growth is expected to exacerbate the company's risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. (BCAR BCAR Brunswick County Association of Realtors BCAR British Civil Airworthiness Requirements BCAR Bullitt County Animal Rescue (Shepherdsville, KY) BCAR Business Case Analysis Report BCAR Beaver Creek Array BCAR Buffalo Civic Auto Ramps, Inc. ), notwithstanding the two capital infusions of NZD NZD In currencies, this is the abbreviation for the New Zealand Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 1.5 million (USD USD In currencies, this is the abbreviation for the U.S. Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 1.1 million) in 2004 and 2005. Nevertheless, CISL's BCAR in 2005 still indicates an adequate margin. Prospectively, given its heavy concentration on consumer credit insurance business, the lending activities in New Zealand's consumer loan markets will determine the sustainability of CISL's growth. A.M. Best remains cautious about CISL's exposure to the cyclical nature of the consumer loan market and its impact on the stability of the company's operating earnings. For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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